Delta Company, a U.S. MNC, is contemplating making a foreign capital expenditure in South Africa. The initial cost of the project is ZAR12,200. The annual cash flows over the five-year economic life of the project in ZAR are estimated to be 3,660, 4,660, 5,650, 6,640, and 7,550. The parent firm's cost of capital in dollars is 9.5 percent. Long-run inflation is forecasted to be 3 percent per annum in the United States and 7 percent in South Africa. The current spot foreign exchange rate is ZAR per USD = 3.75. Required: Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Converting all cash flows from ZAR to USD at purchasing power parity forecasted exchange rates and then calculating the NPV at the dollar cost of capital. Note: Do not round the intermediate calculations. Round the final answer to the nearest whole number. NPV in USD using PPP rates Required A Required C >

Delta Company, a U.S. MNC, is contemplating making a foreign capital expenditure in South Africa. The initial cost of the project is ZAR12,200. The annual cash flows over the five-year economic life of the project in ZAR are estimated to be 3,660, 4,660, 5,650, 6,640, and 7,550. The parent firm's cost of capital in dollars is 9.5 percent. Long-run inflation is forecasted to be 3 percent per annum in the United States and 7 percent in South Africa. The current spot foreign exchange rate is ZAR per USD = 3.75. Required: Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Converting all cash flows from ZAR to USD at purchasing power parity forecasted exchange rates and then calculating the NPV at the dollar cost of capital. Note: Do not round the intermediate calculations. Round the final answer to the nearest whole number. NPV in USD using PPP rates Required A Required C >

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A company is considering two mutually exclusive expansion plans. Plan A requires a $39 million expenditure on a large-scale integrated plant that would provide expected cash flows of $6.23 million per year for 20 years. Plan B requires a $12 million expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $2.69 million per year for 20 years. The firm's WACC is 10%. Calculate each project's NPV. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Plan A: $. million Plan B: $ million Calculate each project's IRR. Round your answers to one decimal place. Plan A: % Plan B: % By graphing the NPV profiles for Plan A and Plan B, determine the crossover rate. Round your answer to one decimal place. % Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to one…
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a) watax inc a mining outfit in phoenix intends to engage in mining operations in southern Africa after conducting comprehensive feasibility of the referenced country. Assume that the prevailing interest rate in South Africa is 9 percent. To meet its working capital needs, watax will borrow south African rands, convert them to us dollars, and repay the loan in one year. What will watax effective financing rate if the rand depreciates by 6 perfect or appreciates by 3 percent. Discuss your result. b) given the information and assuming a 50 % probability that either scenario would occur, determinate the expected value of the effective financing rate. c) Assume that the one tear prevailing interest in mexico is 5 percent while that in the US is 8%. What percentage change in the peso would cause a US firm borrowing peso to incur the same effective financing rate as it would it borrowed dollars. Discuss the result
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A company is considering two mutually exclusive expansion plans. Plan A requires a $40 million expenditure on a large-scale integrated plant that would provide expected cash flows of $6.39 million per year for 20 years. Plan B requires a $15 million expenditure to build a somewhat less efficient, more labor-intensive plant with an expected cash flow of $3.36 million per year for 20 years. The firm's WACC is 9%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Calculate each project's NPV. Round your answers to two decimal places. Do not round your intermediate calculations. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Plan A: $ fill in the blank million Plan B: $ fill in the blank million Calculate each project's IRR. Round your answer to two decimal places. Plan A: fill in the blank Plan B: fill in the blank By graphing…
JJ. 178.
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A company is considering two mutually exclusive expansion plans. Plan A requires a $41 million initial outlay on a large-scale integrated plant that would provide expected cash flows of $6.55 million per year for 20 years. Plan B requires a $13 million Initial outlay to build a somewhat less efficient, more labor-intensive plant with expected cash flows of $2.91 million per year for 20 years. The firm's WACC is 10%. a. Calculate each project's NPV. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. Plan A: Plan B: $ $ million million Calculate each project's IRR. Round your answers to one decimal place. Plan A: Plan B: % % b. By graphing the NPV profiles for Plan A and Plan B, determine the crossover rate. Approximate your answer to the nearest whole number. % c. Calculate the crossover rate where the two projects' NPVs are equal. Round your answer to one…
You are analyzing a project with an initial cost of 130,000 pounds. The project is expected to return 20,000 pound the first year, 50,000 pound the second year, and 90,000 pound the third year. there is no salvage value. the current spot rate is 0.6211 pound. The nominal risk-free rate of return is 5.5% in the UK and 6% in the US. The return relevant to the project is 14% in the US. Assume that uncovered interest rate parity exists. What is the NPV of this project in US dollars using the approximate formula?

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